The EU Commission is undertaking a review of the Sustainable Finance Disclosure Regulation (SFDR), which includes a series of open public consultations on its progress, market uptake and possible adjustments. The latest notice from the Platform on Sustainable Finance, an advisory body established under Article 20 of EU’s Taxonomy Regulation, responds to these consultations. It aims to provide a high-level consolidated opinion from its members on some practical amendments for the EU Commission to consider during their SFDR assessment.
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The EU Commission is undertaking a review of the Sustainable Finance Disclosure Regulation (SFDR), which includes a series of open public consultations on its progress, market uptake and possible adjustments. The latest notice from the Platform on Sustainable Finance, an advisory body established under Article 20 of EU’s Taxonomy Regulation, responds to these consultations. It aims to provide a high-level consolidated opinion from its members on some practical amendments for the EU Commission to consider during their SFDR assessment.
What would a categorisation scheme under SFDR look like?
The current proposal highlights the need to align investors’ sustainability preferences with distinct categories defined under the Regulation, supported by mandatory disclosures presented clearly and understandably. The Platform recommends three categories, each following a distinct sustainability strategy:
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Sustainable: Investments that are either Taxonomy-aligned, qualify as Sustainable Investments without significant harmful activities, or have a clearly defined specification coherent with the EU Taxonomy.
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Transition: Investments or portfolios with a defined focus on the transition to net zero and sustainable economy, while at the same time steering clear from carbon lock-ins and considering EU’s recommendations on promoting finance for a sustainable economy.
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ESG Collection: Excludes investments and activities deemed as significantly harmful and includes assets with better environmental and/or social criteria or applying various sustainability features.
Products which do not fall into any of the above-mentioned categories should be separated as unclassified products.
Is the current proposal final?
While the Platform’s briefing on product categorization provides detailed suggestions, it also calls for an in-depth analysis of the potential implications for Financial Market Participants in the EU. The EU Commission should conduct this analysis before making any final decisions. Additionally, the Platform suggests evaluating whether to extend the new categorization system under SFDR to include products and services under the Insurance Distribution Directive (IDD) and the Markets in Financial Instruments Directive (MiFID) relevant for sustainable preferences.
How can you prepare for upcoming changes in the sustainable finance regulatory landscape?
The latest briefing from EU’s Platform on Sustainable Finance underscores the EU Commission´s commitment to further strengthen the sustainable finance landscape and promote more long-term investments in sustainable economic activities and projects. This process will likely include regulatory changes especially in regulations such as the Corporate Sustainability Reporting Directive (CSRD), SFDR and the Taxonomy Regulation, and it may become a labour-some task for you to stay on top of all upcoming updates.
With our ESG solutions for the Financial Industry you get comprehensive tools to navigate these requirements confidently and avoid compliance risks.
What is your advantage with cleversoft’s Regulatory ESG services?
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Compliance commitment: cleversoft’s ESG services are fully aligned with all regulatory requirements for financial institutions and dynamically adapt to changes in each relevant regulatory framework. This ensures regulatory compliance for all your ESG products and documents without the need for internal review and implementation planning.
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Effortless disclosure administration: Access a pre-defined set of standard KPIs and ready-to-use templates to simplify the entire reporting process, removing the need for manual manipulations.
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Explicitly designed for the financial industry: cleversoft’s ESG services cater to the distinct requirements of banks, insurers, and asset managers, providing a fully functional set of disclosures tailored to your specific needs.
If you would like to learn more about how cleversoft can help you report reliable and comparable sustainability information, contact us via the contact form on our website. Our experts will be happy to advise you on the details.